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Consumer Debt Grows to $2.52 Trillion
Posted By admin On March 8, 2008 @ 10:50 am In Economic Crisis | Comments Disabled
Vincent Del Giudice
March 8, 2008
|In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.|
U.S. consumer borrowing rose in January as Americans spent twice as much on their credit cards as they did a month earlier.
Consumer credit increased by $6.9 billion to $2.52 trillion, the Fed said today in Washington. In December, credit gained $3.7 billion, less than a previously reported increase of $4.5 billion. The figures don’t include borrowing secured by real estate, such as home-equity loans.
People once dependent on home-equity financing are turning to other forms of short-term financing after the collapse in subprime mortgages made it harder to qualify for loans. Personal income in January rose at a slower pace than inflation, and credit card usage in January rose for a second straight month.
“There’s not much gas left in the tank,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “In the early stage of a recession, consumers tend to rely on credit cards to see them through the hard times.”
Economists had forecast January credit would expand by $7 billion, according to the median of estimates in a Bloomberg News survey.
After adjusting for inflation, spending stalled for a second month in January, increasing concern that the economy is headed for a recession. Consumer purchases account for two- thirds of the economy.
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